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An argument in favor of health savings accounts

Are health savings accounts worth it? Expanding the use of these accounts, based on a long-held conservative view that consumers should be more responsible for their health care spending, is a part of almost every GOP replacement plan under consideration on Capitol Hill. Here's the theory behind HSAs: Making consumers bear a bigger upfront share of medical care — while making it easier to save money tax-free for that purpose — will result in more judicious use of the health system that could ultimately slow rising costs.

Most Health Savings Account Owners Stick With Conservative Options While the details of the current proposals differ, they all generally seek to allow larger tax-free contributions to the accounts and greater flexibility on the types of medical services for which those funds can be used. Some include tax credit subsidies to help fund the accounts. But skeptics note the tax break benefits wealthy people more than those who earn less.

Still, expect to hear a lot more about HSAs in the coming months.

Health savings accounts: Another conservative 'reform' nostrum that chiefly benefits the rich

Here's a rundown of some of the basics: How do HSAs work? Unlike some other types of insurance, the consumer pays the full cost of most doctor visits, drugs or hospital stays until the deductible is met. There are some exceptions for services deemed preventive, such as certain vaccines, prescription medications or cancer screenings. To pay for those deductibles and other medical costs, consumers can make tax-free contributions to the HSA account.

The amounts in the HSA grow tax-free, similar to retirement accounts.

  1. Other findings, however, leave little doubt that HSAs help make employees more cost-conscious consumers.
  2. For the sake of America's small businesses, workers, and families, we must also make health care more affordable and accessible.
  3. Expanding the use of these accounts, based on a long-held conservative view that consumers should be more responsible for their health care spending, is a part of almost every GOP replacement plan under consideration on Capitol Hill.
  4. It would also allow the accounts to be coupled with any type of insurance, not just high-deductible plans.

Some employers who offer HSA-coupled insurance contribute to the accounts on behalf of their employees. Money in the funds moves with the policyholders, even if they change jobs or insurers, similar to how workers can take their 401 k retirement fund to a new employer.

  1. Some HSAs charge a monthly maintenance fee or a per-transaction fee, which varies by institution.
  2. By contrast a relatively modest increase in deductibles is evident among the stayers, from U. The prior studies of CDHPs have several notable gaps and weaknesses.
  3. This would cause some companies to stop providing health insurance, or raise employee contributions to a level some workers can't afford. Typically these were located in Utah, which allowed non-financial companies to open state banks without subjecting the parent companies to bank regulations.

Still, polls have shown that most Americans already have little or no money saved for an emergency, so skeptics say they are not likely to embrace medical accounts.

How would they change under GOP proposals? Ryan's plan would allow the tax-free contributions to total as much as the insurance plan's annual deductible and out-of-pocket maximum. Rand Paul's Obamacare Replacement Act would get rid of the upper limit on contributions entirely.

The Case against Health Savings Accounts

It would also allow the accounts to be coupled with any type of insurance, not just high-deductible plans. What services can HSA funds cover? Currently, money in the accounts can be used only for certain health costs, such as deductibles, copayments for doctor visits, hospital care and other out-of-pocket costs. The funds cannot be used to pay premiums on health insurance plans.

Both the Ryan proposal and one from Rep. Christopher Condeluci, an attorney and former counsel to the Senate Finance Committee, said Republicans might seek to loosen the rules around what services are exempt from the deductible, potentially to incorporate medical care important to people with chronic illnesses, such as annual eye exams for people with diabetes.

How common are HSAs? An estimated 26 million Americans — policyholders and their dependents — are covered by some type of HSA-eligible plan. That's a small share of the overall 178 million who have coverage through their jobs or purchased on their own, but it has steadily grown since HSAs first became available in 2003. Kaiser Health News is an editorially independent program of the foundation.

Paul Fronstin, with the Employee Benefit Research Institute, noted that the slow ramp-up is similar to most trends in health benefits.

Health Savings Accounts Are Back In The Policy Spotlight

Now, he said, with the GOP focus on changing the health system, "we could see an acceleration of that trend. Eligible health plans may have lower premiums than other types of insurance because of their higher deductibles.

Policy experts and economists say the accounts might make people better consumers of health care because they have more "skin in the game" and are more likely to shop for the best prices on drugs, medical care or hospitalizations — and avoid running to the doctor with the sniffles. What are the disadvantages?

Health Savings Accounts and Health Care Spending

For one thing, it isn't easy for people to comparison shop on the prices for medical care. And, consumers don't always make good choices.

Pros And Cons Of A Health Savings Account (HSA)

Among those with HSAs, overall spending on medical care does indeed go down, Fronstin and other researchers have reported. But they also uncovered a disturbing trend: ER visits go up. And many even forgo screening exams — such as mammograms or other cancer tests — even though they are specifically excluded from the deductible and are therefore "free" to the consumer.

Bypassing preventive or other care could lead to higher costs in the future.